Clinical Insights – Full Court Rules On Ownership, Substantial Identity and reputation In The Modern

In one of the most significant trade mark related decisions of recent times, the Full Court of the Federal Court has provided clarification on how failing to meet common law ownership and intention to use requirements at the Filing Date can affect the validity of a trade mark application.

The Full Court also affirmed the importance of “good faith” when relying on defences to trade mark infringement, recast the test for assessing “substantial identity” of two trade marks and confirmed the geographical requirements for substantiating a reputation in grounds of opposition.

The key messages for trade mark owners from this case are:

Ensure that the correct party is the applicant.

Complete trade mark searches prior to adopting a mark for use.

Marks which have the same essential elements may be substantially identical.

Reputation in one geographical region may be enough for finding a likelihood of confusion in a different geographical region.

Background

Mr Pham, the sole Director of the Appellant Pham Global Pty Ltd (previously known as AKP Radiology Pty Ltd and then Insight Radiology Pty Ltd) (Pham Global) applied on 7 December 2011 to register in his own name the trade mark depicted below left in respect of radiology services (IR Application). Pham Global commenced use of the IR Mark in country New South Wales in March 2012 and the IR Application was assigned to it in June 2013.

The Respondent, Insight Clinical Imaging Pty Ltd (ICI), is a competing radiology company. It had used the ICI Mark and the name INSIGHT CLINICAL IMAGING in relation to the provision of radiology related services in Western Australia since 2008 and obtained registration of these marks from 10 October 2012 (ICI Marks). ICI opposed registration of the IR Mark by Pham Global before the Trade Marks Office.

Trade Marks Office Decision

The Delegate of the Registrar of Trade Marks upheld ICI’s opposition and refused to register the IR Mark on the basis that Pham Global was not the owner of the mark at common law. The Delegate concluded that the parties’ marks were substantially identical, as the essential features of both marks were the same and both were used in relation to radiology services. Accordingly, it was ICI (as the earlier user) who was the common law owner of the IR Mark.

Federal Court Decision

Pham Global appealed to the Federal Court, where its appeal was joined to ICI’s action against Pham Global for trade mark infringement, misleading and deceptive conduct in breach of the Australian Consumer Law and passing off at common law. Pham Global also counter-claimed for cancellation of the ICI Marks.

On appeal, ICI sought to uphold the Delegate’s decision that Pham Global was not the common law owner of the mark on an alternative basis. It asserted that Mr Pham was not entitled to file the IR Application as it was his company, and not him personally, who owned and intended to use the IR Mark.

In support of this claim, ICI noted that it was Pham Global who had instructed and paid for the creation of, and intended to use, the IR Mark. Accordingly, ICI argued the IR Application was defective as Mr Pham was not the common law owner and he lacked the requisite intention to use the IR Mark at the date the application was filed.

In its decision, the Federal Court disagreed with the Trade Marks Office’s finding that ICI was the common law owner of the IR Mark. The Court concluded that as there was not a “total resemblance of impression” between the IR Mark and the ICI Mark, there was not the “substantial identity” between the marks necessary for ICI to claim ownership of the IR Mark at common law.

Further, the Federal Court rejected the alternative basis for arguing Pham Global was not the common law owner of the mark. Whilst the Court agreed that Mr Pham could not claim to be the common law owner or assert an intention to use the IR Mark at the time of filing, these “defects” were resolved as a matter of law by Mr Pham assigning the mark to Pham Global (the true owner) during the application process.

Ultimately, the Federal Court agreed with the Delegate that registration of the IR Mark should be refused. However, the Federal Court refused registration on the alternative basis that use of the IR Mark by Pham Global for radiology services would deceive or cause consumer confusion in light of ICI’s reputation in the ICI Marks.

On infringement and breaches of the Australian Consumer Law, the Federal Court found in favour of ICI. Pham Global had conceded its IR Mark was deceptively similar to the ICI Marks and it was unable to make out any defences. In particular, the Federal Court rejected Pham Global’s reliance on the “own name defence” on the basis that its failure to conduct trade mark clearance searches prior to adopting the IR Mark meant that Pham Global could not establish the “good faith” element of the defence.

Full Court Decision

The Full Court (Greenwood, Jagot and Beach JJ) unanimously dismissed the appeal on all grounds, and reversed the decision of the Federal Court on the intention to use and ownership issues.

Was the IR Application defective because it was filed in the name of Mr Pham?

The Full Court held that the IR Mark should be refused registration as, on the date of filing of the IR Application, Mr Pham both could not claim to be the owner of the IR Mark at common law and did not have the required intention to use the mark. Importantly, these defects could not be cured by the assignment to Pham Global.

In coming to this conclusion, the Full Court made the following observations:

The Australian trade mark registration system is a system of registration of ownership and not ownership by registration.

As a claim to ownership is a pre-requisite to filing a valid trade mark application, and the exclusive right to use a trade mark dates back to the filing date, the relevant time at which the assessment of ownership and intention to use must take place is at the filing date of the application.

Establishing ownership of a trade mark for the purposes of registration requires demonstrating either:
(a) authorship and use prior to filing the application; or
(b) authorship, filing the application and an intention to use/licence/assign the trade mark in accordance with the Act.

A trade mark application is not, in itself, a form of property. The application is mere “inchoate title” to the claimed trade mark which vests upon registration. There is nothing in the Act that allows a trade mark application to be assigned independently of the rights in the underlying trade mark (which are a form of property).

As the Act confirms that it is the trade mark, and not the application, which is assigned if ownership is being transferred, the Act does not allow for an error in the identity of the applicant to be “cured” by assignment. An assignment in these circumstances is effectively void as it is, in reality, an attempt by the Applicant to assign a trade mark it does not own.

Was the IR Mark substantially identical to the ICI Mark?

The Full Court also held that registration of the IR Mark should also be refused on the basis that ICI, and not Pham Global, was the common law owner of the IR Mark for the following reasons:

The Federal Court misapplied the test for substantial identity by failing to identify and conduct its assessment by reference to the “essential elements of the mark”.

The “essential elements” are the “dominant cognitive cues” in a mark, being those “features striking the eye in a side by side comparison…”. Descriptive elements are not “apt” to distinguish and are, therefore, unlikely to be dominant cognitive cues.

The marks are substantially identical:
(a) the dominant cognitive cues in both marks are “a device which is circular in shape evoking an eye to the left of the word “Insight” in circumstances where the other words … are descriptive of the services offered”;
(b) there was a total impression of resemblance between the marks as the “differences between the marks are slight having regard to their essential elements or the dominant cognitive clues which they present”.

As the marks were substantially identical, and were used for the same services, ICI (as the earlier user) was the owner of the IR Mark.

Would consumers be confused by use of the IR Mark?

The Full Court affirmed the Federal Court’s finding that registration of the IR Mark should be refused as use of the IR Mark would cause consumer confusion in light of ICI’s reputation in its ICI Marks.

In coming to this conclusion, the Court discussed the relationship between consumer confusion and the provision of services in a localised area:

The words “reputation in Australia” in section 60(a) refer to a reputation “anywhere” in Australia (even a localised reputation).

Even if the reputation is limited to a localised area, an Opponent may still be able to demonstrate that consumer confusion will arise having regard to the nature of the market, the specialised nature of the services and the participation of traders and customers in the market from outside the regional area.

Given “the reality of modern life, with widespread use of the internet … and free and frequent movement of people across Australia”, it is no longer appropriate to limit the possibility of consumer confusion to only the geographical area in which the party trades.

Did Pham Global infringe the ICI Registered Mark?

The Full Court affirmed the Federal Court’s finding that Pham Global infringed the ICI Marks, as Pham Global could not make out any of the defences to infringement. In particular, the Court affirmed that the “good faith” element of the “own name defence” cannot be made out if there has been “a lack of diligence and reasonable care in carrying out adequate searches before adopting a new mark.”

The Full Court also rejected Pham Global’s application to limit the scope of ICI’s registrations to prevent their use in New South Wales and Tasmania. While Pham Global claimed that it has used its IR Mark in these jurisdictions before ICI applied to register its ICI Marks, the Full Court considered that this claim was misconceived — as the Full Court had found that the IR Mark was owned by ICI, any reputation generated by Pham Global’s use of the IR Mark “was ICI’s reputation”.